NEW DELHI, Feb 2: Growth in factory activity dropped in January from December two-year high as new orders rose at a weaker rate despite factories keeping price increase to a minimum, a business survey showed.
The HSBC Manufacturing Purchasing Managers’ Index (PMI) released today said subdued growth and inflation could give the Reserve Bank of India reason to cut interest rates again in the coming months.
The growth index has been above the 50 level, which denotes growth, since November 2013 but missed poll expectations for a smaller drop in January, to 53.5.
“Sluggish growth and falling inflation further reinforces our view that the RBI should deliver upfront rate cuts,” said Pranjul Bhandari, Chief Indian Economist at HSBC. Commodity prices have fallen in recent months, Brent crude particularly, and the RBI made a surprise 25 basis point cut to its repo rate in January, putting it at 7.75 per cent. A sub-index covering new orders fell to 54.4 from 57.9 in December on weaker international demand. One of India’s main export destinations, the euro zone, is struggling to revive its economy and battling disinflation.
(AGENCIES)
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